Stryker Corp.’s OtisMed unit will pay $80 million in fines because the division distributed its knee replacement surgery devices without regulatory approval in 2009.
Stryker said in a statement that the DOJ acknowledged that OtisMed’s criminal conduct “occurred prior to Stryker’s acquisition of OtisMed and without Stryker’s prior knowledge or acquiescence.” Bloomberg says:
OtisMed will pay a fine of $34.4 million and forfeit $5.16 million in a criminal case, while paying a civil fine of $41.2 million. The company pleaded guilty today in federal court in Newark, New Jersey, where former Chief Executive Officer Charlie Chi also pleaded guilty. Stryker bought OtisMed Corp. in November 2009.
The company admitted it never obtained U.S. Food and Drug Administration approval to sell 18,000 custom-built devices used by surgeons from 2006 to 2009 to make accurate bone cuts to implant prosthetic knees. OtisMed applied for FDA approval in October 2008, and the agency said 13 months later the company hadn’t shown it was safe and effective. Chi then shipped 218 devices to surgeons, overruling his advisers and board.
When Investment Rhymes with Canada
Canada has a proud history of achievement in the areas of science and technology, and the field of biomanufacturing and life sciences is no exception.
Stryker made two acquisitions in 2009 – OtisMed, and the Sonopet Ultrasonic Aspirator. The combined deals were worth $67 million at the time, with the potential for another $36 million – though Stryker never disclosed exactly how much it paid for OtisMed. However, the $80 million fine is nearly three times the total revenue OtisMed brought in for all of the knee devices it sold, U.S. Attorney Paul Fishman said in a press conference. OtisMed has been barred from Medicare, Medicaid and all other federal healthcare programs for 20 years, Bloomberg says, though Stryker will not be.
This is a tough time for the medical device behemoth, however: Stryker just last month agreed to pay $1.4 billion for another lawsuit concerning hip implants that were recalled in 2012 because patients complained of pain and swelling from metal corrosion and debris.
Read the whole Bloomberg piece here.
